The effect of an intragroup sale of inventories in a prior period, where the inventory is still on hand at the end of the prior period but is sold in the current period, is that a credit adjustment is made to income tax expense in the subsequent period.

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The effect of an intragroup sale of inventories in a prior period, where the inventory is still on hand at the end of the prior period but is sold in the current period, typically requires an adjustment to eliminate unrealized profit and adjust the cost of goods sold, rather than directly adjusting income tax expense. The tax effect would be indirect, as the elimination of unrealized profit affects pre-tax income, which in turn could affect the income tax expense.

The Effect of an Intragroup Sale of Inventories in a Prior